Sullen state lawmakers return to the Capitol today to face another $2 billion budget problem – and a political climate that’s changed since their last special session in May.
The economy continues to lag in its recovery. But after lawmakers cut $10 billion in projected spending over the past three years, the stiff political opposition to tax hikes might be easing – if not turning.
Democratic Gov. Chris Gregoire, in a major switch from her position one year ago, wants to fill part of the new budget hole with new taxes. Her proposal potentially raises $750 million and includes a temporary, half-cent boost in the sales tax that would go to a statewide referendum vote in the spring.
The Association of Washington Business, which helped pass a tax-control initiative in 2010, is not disagreeing with the need for revenues this time. AWB is taking a neutral position on Gregoire’s tax plan while urging her and her majority Democrats to look for cost-cutting reforms or efficiencies that go further than agency mergers and privatization moves they agreed to in May.
“At the end of the day, I think we recognize that things like higher education, public health and public safety are on the line,” Don Brunell, president for the AWB, said last week in an interview. “We’ve talked to (Gregoire) a lot and will be talking to her down the road. … The way we view this thing is everything is on the table – expenditures as well as revenue.”
AGENDA: TAXES, JOBS AND REFORM
The special session can last up to 30 days, and lawmakers are expected to return Jan. 9 for a 60-day regular session. Gregoire wants them to finish the budget as quickly as possible, then devote next year to creating jobs.
But the agenda is going to be full – starting with a proposal to provide rescue loans this week to a Wenatchee-area events center that will default on a $42 million debt on Thursday without an immediate bridge loan. Also in the offing: proposals to issue potentially $1 billion or more in construction bonds to fix schools, build health care structures and boost the beleaguered construction industry.
Plus, the minority Republican caucuses and business groups want those reforms that reduce the size of government, improve its efficiency, lower its costs and potentially change the way education dollars are allocated. A big unknown is how the state Supreme Court might rule on a major school funding case. Chief Justice Barbara Madsen said last week that the court is trying to fashion a decision soon on whether it is a constitutional duty for the state to fund basic education.
Against that backdrop, Brunell’s comments are significant. Brunell said cuts in Gregoire’s no-tax budget proposal released last week are so deep “it is going to dig into the real (public-sector) fabric that makes the economy go with an educated work force.”
Among the cuts: a $160 million reduction to universities and community colleges that already had a half-billion-dollar cut this year. Other proposed cuts carve into public schools, including a shorter attendance year.
Anti-tax activist Tim Eyman says Gregoire’s call for new revenues are based on “lies” about state spending, which he contends should simply be reduced.
But in a speech outlining her options last week, Gregoire described an emergency for educators and those in need: “Our state government has a whole new form – it’s smaller, leaner, and – sadly – meaner to Washingtonians who depend on services that the private sector does not provide.”
PROTESTS TO GET LOUDER, BIGGER
House Ways and Means Committee Chairman Ross Hunter, D-Medina, is giving a hearing today to Gregoire’s no-new-revenue budget, also known as House Bill 2127. Hunter says he has not put a time limit on the hearing, which immediately follows a Wenatchee-rescue-loan vote.
Hunter and colleagues might be in for a long night.
A handful of activist groups is planning a series of rallies and vigils against further spending cuts – beginning with an “Occupy the Capitol” action that was to begin Sunday night with overnight protests and tents, which are not allowed on the Capitol Campus without permits.
The series of protests and rallies could draw thousands, including home care union workers, teachers, state employees and members of the Occupy Olympia group that set up camp last month in Heritage Park.
GOP: YES TO REFORM, GAMING; NO TO TAXES
In anticipation of a difficult session, leaders and budget writers in the Legislature’s majority Democratic and minority Republican caucuses have been staking out positions on both sides of the revenue and cuts disputes.
Republicans flatly oppose new taxes but are open to new revenues that might result from reforms. Some Republicans also favor legalization of tribal-style video slot machines in nontribal venues, such as restaurants and bars.
Senate Republican Leader Mike Hewitt of Walla Walla and Rep. Gary Alexander, the Thurston County Republican who is the minority voice on the budget in the House, both say that talk of tax hikes is premature.
“Our caucus is going to stick to reform before revenue,” Hewitt said.
Hewitt and Alexander want to see the state tighten up eligibility for programs that cater to the low-income residents or have allowed services to people who cannot document their legal residency.
Democrats control the Senate by a 27-22 margin, which was narrow enough that Republicans and fiscally conservative “Road Kill” Democrats forced a no-new-taxes solution to the nearly $5 billion budget gap last May.
This time, the Road Kill members are taking a different tack on taxes, although their message is bipartisanship.
“It’s time for our political parties’ leadership to speak plainly to even the most ardent of each party’s base,” said conservative Democratic Rep. Deb Eddy of Kirkland and Democratic Sen. Steve Hobbs of Lake Forest Park in a joint statement.
GOING TO THE PEOPLE – BUT WITH WHAT?
Gregoire’s administration has talked of a possible March tax referendum. But Murray said a statewide campaign for a March tax referendum would step on February campaigns for school levies, so he prefers an April date.
Sen. Karen Fraser, an Olympia Democrat and No. 2 member of the Senate Democratic Caucus, said there are many competing ideas for how much the state should try to accomplish by cuts, how much to raise in new taxes, and how much to rely on a sales tax.
Neither she nor Murray, Hunter or House Majority Leader Pat Sullivan, D-Covington, were willing to say exactly what a tax package might include or how big it could be.
But Murray said the temporary sales tax has the advantage of being quick to put in place and hitting a broad base of the population.
All the usual pro-revenue groups are on board with at least the spirit of Gregoire’s plan.
She proposes a half-penny increase in the state’s 6.5-cent share of the sales tax, which – together with local government sales taxes – totals more than 9 cents per $1 purchase in many jurisdictions.
Gregoire also wants to limit or end tax breaks for banks’ earnings on mortgage interest and other breaks for oil companies.
“The opposition will be loud and vigorous. We need to do everything in our power to support the governor as we move into the first days of the special legislative session that begins on Monday,” shouted Jerry Reilly, a lobbyist for the Eldercare Alliance.
Brad Shannon: 360-753-1688
bshannon@theolympian.com
www.theolympian.com/politicsblog
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